UK to assume debt in case of Scottish independence

The British government has pledged that it will assume all UK government debt in the event Scotland votes for independence a move meant to reassure markets ahead of what is likely to be a heated campaign.
The Treasury issued a paper Monday declaring that the "continuing" UK government will honour the contractual terms of the debt if Scotland votes to break away in a Sept. 18 referendum.
An independent Scotland would still need to pay its "fair and proportionate share" of the UK's outstanding stock of debt, the Treasury added.
"In the event of independence, the full spectrum of assets and liabilities past, future and contingent would need to be considered in negotiations between the continuing UK and Scottish governments, on a case-by-case basis," the report said.

The pre-emptive statement from the Treasury is intended to provide clarity and keep a lid on borrowing rates by eliminating uncertainty, which may add to the risk premium demanded by investors.
That could mean investors ask for higher interest rates on U.K government bonds that are often called gilts.

Though opinion polls continue to point to Scotland remaining in the UK, some fund managers have voiced concerns recently about how the UK national debt of 1.38 trillion pounds (USD 2.2 trillion) would be divvied up in the event of a vote in favour of independence.
How the debt would be split up in the event Scotland leaves the union it's been part of since the early 1700s is no easy matter, though. Dividing by population or spending ratios come up with different outcomes, for example.

Pro-independence Scottish National Party leader Alex Salmond said the report showed the British authorities seriously planning for a possible Scottish exit.
In the past, he had suggested that an independent Scotland would be within its rights to walk away from a portion of the debt unless there was discussion about sharing assets, like the pound.
"Any market uncertainty in the gilts market has been caused by their own refusal to discuss the terms of independence before the referendum," Salmond said.
"Today's announcement makes clear that Scotland would be in an extremely strong negotiating position to secure that fair deal," he added.

Scottish independence advocates say they want to continue to use the pound as the country's currency and remain in the European Union and NATO should independence take place.
Though Scotland is part of the UK, it has had its own Parliament since 1999 and makes its own laws in many areas.
Salmond's governing Scottish National Party supports independence, but the opposition Labour and Conservative parties both oppose it.